This could be the end of certain types of travel in South Africa: FNB
The latest hotel data from Statistics South Africa shows the country’s tourism industry has still not recovered to pre-pandemic levels, with long-term travel trends pointing to some notable structural shifts.
Commenting on the latest data, FNB property strategist John Loos said a gradual improvement is expected in 2022 on the back of Covid-19 seemingly having receded as a threat, and lockdown regulations relaxed even further from late in 2021. However, he noted that several factors continue to constrain the industry, slowing its full recovery.
- Firstly, domestic holiday tourists as a group are more financially pressured than prior to Covid-19, due to the impact of the 2020 recession on employment and incomes, not to mention recently rising CPI and interest rates. With much holiday tourism being nonessential in nature, this expenditure category gets put on the backburner for many households while they nurse their finances back to health.
- Secondly, FNB has argued for a while that business travel not only battles from similar financial constraints following the 2020 recession impact on businesses, but the business sector has also successfully “Zoomified” much of its interaction during forced lockdowns. This modern communication likely pushes it partially away from less efficient physical travel. Much of that costly physical business travel may therefore never return. Many hotels may have to be less dependent on domestic business travel on a more permanent basis, therefore.
More recently, the KZN Province has been hit by severe flooding, and this may have been having an impact over the Easter Weekend and possibly beyond, a typically busy time for hoteliers that may have been less busy due to the floods and the damage they have caused, Loos said.
“We would expect hotel occupancy and income improvements to continue in 2022, on the assumption that everyone remains freer to move around as vaccine rollouts progress, across the world as well as in SA, and the virus threat recedes.”
“But the financial impact from the 2020 recession on households and businesses alike lingers, and this is a key drag on the pace of recovery in what is a non-essential spending category for many. Therefore, we may not see 2019/early-2020 levels of hotel revenues returning yet this year, especially not in real (inflation-adjusted) terms.”
Numbers are up – but not back to where they were
Data from Statistics South Africa shows the hotel sector is battling to fully recover from the harsh Covid-19-related lockdown shock back in 2020. This is despite year-on-year growth appearing to be impressive, said Loos.
On a year-on-year growth rate basis, total hotel sector income was a very strong 175%, slightly slower than the 177.6% rate for January. But these growth rates have limited significance given that this income was coming off a very low base when compared with 2020/early-2021 lockdown levels, Loos said.
“Given the abnormalities created in growth rates by the low lockdown base, it makes more sense to view total revenue value, and compare it to the comparable month back in early-2020, a pre-Covid-19 month. We then see a more accurate picture of a hotel sector whose income is still under severe pressure.
Total hotel industry income in February 2022 was still -33.9% below the income for February 2020, the last month prior to the 2020 lockdown announcement in March of that year.
Hotel income growth does continue to outpace the growth in income in both the “Guest House and Guest Farm” category as well as “Camp Sites and Caravan Parks”, with the former category under longer-term pressure while the latter category having already recovered far earlier during the post-lockdown phase.
Going further to view occupancy rates, in February 2022, the national hotel occupancy rate was 35.5%, still well below the 53.9% rate for February 2020.
“It isn’t only a low occupancy rate that still constrains hotel income. It is a more constrained client financial environment too, and the average hotel income per stay night in February 2022, despite the significant post-lockdown recovery, was still -23.1% down on the February 2020 level,” Loos said.
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